By Paul O’Hagan, Deputy Director of BNE
As expected, the German constitutional court today approved the country’s contribution to the euro zone bailouts. This decision was of course crucial to Chancellor Merkel as she faces increasing political pressure at home on what Germany’s role should be in saving the common currency but the approval came with strings attached.
Also as expected, the court decreed that any future bail out arrangements would be subject to greater say from the Bundestag in order to safeguard sovereignty and preserve the parliament’s authority on Germany’s budgetary expenditure. This decision is of course understandable given the fact that Germany is the biggest contributor to any bail out fund.
Andreas Vosskuhle, president of the court, stated that the decision however was not a “blank check for additional rescue packages.” This decision may present yet another challenge to a swift and effective remedy to the crisis. Many are calling for greater integration within the euro zone through the joint euro bonds, tax harmonisation, budget coordination and the possible establishment of a central finance ministry.
These steps towards federal governance are indeed profound and should be taken sooner rather than later. The court’s decision today, whilst commendable for safeguarding parliamentary sovereignty, may in fact only hamper and prolong the recovery of the euro”.